Comcast’s Revenge: Never Sell Hulu

Selling its Hulu stake to Disney would help offset the cost of acquiring Sky, but Comcast has good reasons to hold on

Comcast has good reasons to hold on to Hulu.
Photo:
Dan Goodman/Associated Press

By

Elizabeth Winkler

Oct. 7, 2018 10:00 am ET

After all the bidding and counterbidding between
Comcast
CMCSA -0.19%
and
Disney
DIS 0.38%
this year, the final and most obvious deal is for Comcast to sell its 30% stake in Hulu to
Disney.
DIS 0.38%
Such a transaction is eminently logical: Comcast could cut the debt it is taking on from its $40 billion deal for Sky, Europe’s largest pay-TV group. And Disney would get almost complete ownership of Hulu.

But don’t count on a sale anytime soon. Comcast has good reasons to hold on to Hulu, one of which is simply to annoy Disney.

With Disney’s acquisition of 21st Century Fox assets, it now owns 60% of Hulu. (
AT&T
owns the remaining 10% through its acquisition of Time Warner.) Analysts estimate that Comcast’s stake is worth as much as $5 billion, and owning it would give Disney near-total control over Hulu.

In some ways, that handover would make sense: a service that was originally created as a three-way partnership between Fox, Disney, and Comcast has changed radically with the Fox-Disney deal. It is now an enterprise controlled by two media companies whose relationship is chiefly one of rivalry and animosity.

Wouldn’t Comcast rather get out, and focus its energy and money on its new acquisition in Europe instead? The answer is no—for several reasons.

First, Comcast enjoys a significant stream of passive revenue from the NBC content that runs on Hulu. It isn’t clear that it could license that content elsewhere.

Second, by staying at Hulu, Comcast slows down Disney’s move to streaming, which threatens its business. If Disney had total control of Hulu, with its 20 million U.S. subscribers, it wouldn’t need a new, Disneyflix platform. As things stand, it isn’t in Disney’s interests to invest too heavily in a platform from which Comcast benefits.

Third, Hulu gives Comcast access to critical data about consumer viewing preferences and subscriber trends. With its U.S. business and now Sky in Europe, Comcast is entrenched in the legacy ecosystem. The Hulu data is valuable for understanding the threat to its core cable business. It could also be useful for moving more aggressively into streaming down the road.

Finally, at Hulu Comcast can remain a thorn in Disney’s side. That is a value not to be underestimated.